AUD/USD slips from YTD high as stronger US Dollar and wedge rejection weigh on outlook

Source Fxstreet
  • AUD/USD slips from YTD high as rising US yields lift demand for the US Dollar.
  • US Dollar gains traction on trade optimism and steady Fed expectations.
  • AUD/USD rejection at wedge resistance raises downside risks below 0.6600.

The Australian Dollar (AUD) is losing ground against the US Dollar (USD) on Friday, pressured by rising US Treasury yields that continue to support demand for the Greenback.

After climbing to a year-to-date high of 0.6625 on Thursday, AUD/USD has slipped, trading below 0.6600 at the time of writing.

Market sentiment toward the US Dollar has improved. While President Donald Trump continues to criticize the Federal Reserve (Fed) for not cutting rates, his reassurance that Chair Jerome Powell will remain in his position has helped ease investor concerns.

That, combined with encouraging trade developments and resilient US economic data, has kept upward momentum behind the USD.

Attention is now shifting to upcoming trade negotiations and central bank decisions.

Talks between US Treasury Secretary Scott Bessent and Chinese officials are set to begin Sunday in Stockholm and will run through Tuesday, with both sides aiming to build on the current trade agreement. Meanwhile, investors are also eyeing signs of progress in potential trade discussions between the US and the EU.

Looking ahead, next week’s focus will turn to the Fed’s rate decision on Wednesday. Markets broadly expect the Fed to hold rates steady within the 4.25%–4.50% range.

AUD/USD technical analysis: Rejection at resistance raises downside risks

As for the AUD/USD pair, part of the recent pullback may be driven by profit-taking after the sharp rally.

On the daily chart, price action remains contained within an ascending wedge pattern. Thursday’s move to 0.6625 marked an eight-month high, touching resistance at the top of the wedge. However, the pair failed to break higher, prompting sellers to step in.

The rejection at the recent high is technically significant. Thursday’s candle shows a long upper wick, signaling fading bullish momentum. The current session is forming a full-bodied bearish candle, reinforcing the reversal and suggesting the possibility of further downside.

AUD/USD daily chart

For bears to build momentum and shift the trend, initial support lies at 0.6550, a prior resistance level now acting as horizontal support.

A break below this would bring the 50-day Simple Moving Average (SMA) into focus at 0.6508, followed by the July swing low at 0.6454.

If downside pressure deepens, the next levels to watch are the 200-day SMA near 0.6393 and the June swing low, which aligns with rising wedge support at 0.6372.

On the bullish side, a decisive close above 0.6625 would indicate a breakout from the wedge pattern, opening the door for further gains toward the November high at 0.6687.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Ripple’s $21 Trillion Dream: What Capturing 20% Of SWIFT Volume Means For XRPRipple Labs, a crypto payments company, continues to set its ambitions and those of XRP higher than ever as it edges closer to disrupting the global financial messaging giant SWIFT. After Ripple CEO
Author  NewsBTC
7 Month 14 Day Mon
Ripple Labs, a crypto payments company, continues to set its ambitions and those of XRP higher than ever as it edges closer to disrupting the global financial messaging giant SWIFT. After Ripple CEO
placeholder
Ethereum Price Momentum Explodes—Is the Path to $4K Wide Open?Ethereum price started a fresh increase above the $3,750 zone. ETH is now showing bullish signs and might continue to rise toward the $3,950 zone. Ethereum started a fresh increase above the $3,750
Author  NewsBTC
7 Month 22 Day Tue
Ethereum price started a fresh increase above the $3,750 zone. ETH is now showing bullish signs and might continue to rise toward the $3,950 zone. Ethereum started a fresh increase above the $3,750
placeholder
Dollar Inches Higher as Traders Await ECB Decision and U.S. Data ReleasesThe U.S. dollar edged higher Thursday but remains at low levels, while the euro slipped ahead of the latest policy-setting meeting from the European Central Bank.
Author  Mitrade
7 Month 24 Day Thu
The U.S. dollar edged higher Thursday but remains at low levels, while the euro slipped ahead of the latest policy-setting meeting from the European Central Bank.
placeholder
U.S. stock futures edge up as Wall Street rallies on Alphabet's surge to record highsU.S. stock index futures experienced a slight uptick on Thursday evening, buoyed by record-high closures on Wall Street following strong earnings reports from Alphabet and optimism surrounding potential trade agreements.
Author  Mitrade
Yesterday 02: 18
U.S. stock index futures experienced a slight uptick on Thursday evening, buoyed by record-high closures on Wall Street following strong earnings reports from Alphabet and optimism surrounding potential trade agreements.
placeholder
Asian Stocks Pull Back from Peaks as Dollar Gains Momentum Before Critical Week Asian shares saw a decline on Friday, with Japanese markets stepping back from record highs as investors opted to secure profits. This comes ahead of a pivotal week that includes U.S. President Donald Trump’s tariff deadline and multiple central bank meetings. The dollar strengthened against the yen after recovering from a two-week low, buoyed by positive U.S. economic data.
Author  Mitrade
Yesterday 06: 34
Asian shares saw a decline on Friday, with Japanese markets stepping back from record highs as investors opted to secure profits. This comes ahead of a pivotal week that includes U.S. President Donald Trump’s tariff deadline and multiple central bank meetings. The dollar strengthened against the yen after recovering from a two-week low, buoyed by positive U.S. economic data.
Related Instrument
goTop
quote